How Massachusetts and Michigan Show the Next Fraud Frontier—and Why States Are Looking the Other Way

By Project Milk Carton, January 09, 2026

Part 5: The Warning Signs No One Wants to See

The pattern emerging across America’s child welfare system isn’t just about crimes already committed. It’s about warning signs flashing red while officials deliberate whether to even look.

Michigan and Massachusetts represent what happens when oversight collapses before the fraud appears. Both states show the infrastructure vulnerabilities, the regulatory gaps, and the political resistance that precede billion-dollar schemes. And both are fighting efforts to investigate their child care programs.

What We Found:

When Project Milk Carton analyzed Michigan and Massachusetts using the same fraud detection framework that identified patterns in Minnesota, Illinois, and Colorado, we found states in crisis—but not yet in scandal. Michigan lost $8.5 billion to pandemic unemployment fraud while its child welfare system spent 18 years under federal court supervision. Massachusetts paid out a $7 million “house of horrors” settlement after social workers ignored 14 abuse reports, then unlawfully destroyed the records.

Neither state has prosecuted organized child care fraud at Minnesota’s scale. But the conditions are identical.

Michigan: When $8.5 Billion Disappears and Nobody Gets Fired

Michigan’s unemployment agency paid out $8.5 billion in fraudulent claims between March 2020 and September 2021. That’s 20 percent of every dollar the state distributed.

Of that total, $2.8 billion went to imposter fraud—stolen identities used to file fake claims. Another $5.7 billion went to intentional misrepresentation. Nearly all of it was federal money.

State Senator Aric Nesbitt cited that failure when he requested an audit of Michigan’s child care program this January. “We can’t wait until all the money is gone for people to start asking questions,” Nesbitt wrote to the state auditor general.

The response from Michigan’s Department of Lifelong Education, Advancement, and Potential was immediate: “MiLEAP has zero tolerance policy for fraud.”

But the agency hasn’t conducted a forensic audit of its $540 million child care program. There are no known prosecutions of organized provider fraud. And the state’s only public fraud case involves a single employee who embezzled $27,000 from a regional resource center.

The same oversight culture that lost $8.5 billion in unemployment fraud now supervises 46,700 children in subsidized child care.

Sixteen Years Under Federal Supervision

Since 2006, Michigan’s foster care system has operated under federal court oversight following a class-action lawsuit alleging systematic mistreatment of children.

In January 2025, U.S. District Judge Nancy Edmunds noted “significant progress”—but the state met requirements in only five of 26 monitored areas. Twenty-one areas remained non-compliant or partially compliant.

Recent audits reveal the depth of ongoing failures. In April 2025, auditors found that Michigan’s Office of Family Advocate failed to screen approximately 150 child deaths over 18 months. These weren’t investigated cases. These were deaths that never received initial screening to determine if review was warranted.

A July 2024 audit found Child Protective Services wasn’t meeting its 24-hour face-to-face assessment requirement. The state changed its policy to count “reviewing case history” as the start of an investigation—allowing up to 72 hours before a caseworker actually sees the child.

Over a recent 10-year period, 371 Michigan children died from abuse or neglect. Federal monitors noted that dozens each year had prior CPS complaints.

The Unaccompanied Minor Money Trail

Michigan received $94.4 million in federal subawards for unaccompanied minor services since 2014. Of that total, 94.5 percent went to a single organization: Bethany Christian Services.

Bethany operates multiple facilities across Michigan, including the controversial Warwick Living Center in Alma—a former nursing home converted to house migrant children in 2022. Residents reported inadequate food, no outdoor recreation, and workers who didn’t speak Spanish.

The facility closed within months. Bethany’s federal contracts continued.

Massachusetts shows a similar concentration pattern. International Institute of New England received $7.8 million in unaccompanied minor subawards. Ascentria Community Services received $5.9 million—until the Office of Refugee Resettlement issued a stop-work order on all its cases in February 2025.

These aren’t necessarily fraudulent contracts. But the concentration of federal child welfare funding through single organizations with minimal public oversight creates the same vulnerabilities Minnesota exploited.

Massachusetts: When Revenue Grows 1,444 Percent in Three Years

The Immigrant Family Services Institute in Mattapan, Massachusetts reported $618,624 in revenue on its 2019 tax return. By 2022, revenue had grown to $9.5 million.

That’s a 1,444 percent increase in three years.

Officer compensation at IFSI reached $2.9 million in 2022—30.2 percent of total revenue. Industry norms run between 5 and 15 percent.

IFSI serves the Haitian immigrant community and claims to have helped 15,000 people since 2021. The organization may be completely legitimate. But its financial profile matches the explosive growth pattern seen in Minnesota’s Feeding Our Future network.

Project Milk Carton identified dozens of Massachusetts nonprofits showing similar trajectories:

• African Community Education Program (623 percent growth),

• La Colaborativa (572 percent growth),

• Accelerate Action Inc (1,118 percent growth).

None are accused of wrongdoing. All deserve scrutiny.

The Audit No One Will Conduct

When Massachusetts State Representatives Marc Lombardo and Nicholas Boldyga requested a “top-to-bottom audit” of the state’s child care financial assistance program in January 2026, they cited Minnesota’s fraud scandal and the need for accountability.

The state’s response mirrored Michigan’s: assurances of existing oversight, claims of regular audits, promises that fraud detection systems work.

But the Department of Early Education and Care’s most recent audit told a different story. Investigators found that 45 percent of abuse investigations were completed late—some delayed up to 585 days. Ten percent of high-risk cases were assigned to licensing staff instead of trained investigators. Background checks weren’t completed for employees at residential programs serving vulnerable children.

Massachusetts serves 55,000 children daily through 9,000 licensed programs. The state’s Bureau of Special Investigations identified $284,677 in child care fraud during fiscal year 2024—from just five investigations.

That’s not evidence of a fraud-free system. That’s evidence of a system that isn’t looking.

The Group Home Crisis

Northeast Center for Youth and Families operates multiple residential facilities across Massachusetts. A 2011 state audit found the organization misused over $1 million in public funds over five years.

Fourteen years later, NCYF’s Greylock Group Home racked up 132 compliance violations—the second-highest total in the state. In March 2025, worker Xavier Cruz was charged with six counts of aggravated rape of a 14-year-old resident.

Cruz had a prior larceny conviction. NCYF hired him anyway as a night supervisor.

Massachusetts paid $794 per day per child at Greylock. That’s roughly $290,000 per year for each occupied bed. The facility closed after Cruz’s arrest, but NCYF continues operating other homes under increased scrutiny.

In 2023, 949 children went missing from Massachusetts foster care. Of those, 80 were confirmed sex trafficking victims. When children returned, 82 percent received no trafficking screening. Documentation failures occurred in 96 percent of cases.

Shared Hope International gave Massachusetts an F grade for child and youth sex trafficking prevention.

The Political Calculus of Willful Ignorance

Neither Michigan nor Massachusetts appears on the Trump administration’s list of states with frozen child care funding. Minnesota, California, Colorado, Illinois, and New York face federal scrutiny. Michigan and Massachusetts do not.

That may be political calculation. Or it may be that federal investigators simply haven’t looked yet.

What’s clear is that both states resist internal audits while documented failures multiply. Michigan’s auditor general is “evaluating” Senator Nesbitt’s request. Massachusetts legislators asked for a comprehensive review—and received bureaucratic assurances instead.

The pattern is consistent: Massive growth in opaque nonprofit revenue. Federal money flowing through concentrated vendor networks. Child welfare systems under court supervision or audit criticism. Missing children. Delayed investigations. And political resistance to the one thing that might reveal the scope of the problem—a real audit.

What Happens Next

Minnesota’s Feeding Our Future scandal happened because nobody looked until $250 million disappeared. Federal prosecutors are still unraveling a scheme involving 70+ defendants and ongoing investigations.

Michigan lost $8.5 billion before anyone noticed. Massachusetts paid a $7 million settlement for abuse that 14 separate reports should have stopped.

The question isn’t whether fraud exists in these states’ child welfare systems. The question is whether anyone will look before the next billion disappears.

Project Milk Carton’s analysis suggests the infrastructure for massive fraud already exists. The nonprofit networks show Minnesota-style growth patterns. The oversight agencies show Minnesota-style failures. And the political response shows Minnesota-style resistance to investigation.

The warning signs are clear. What remains unclear is whether anyone in power wants to see them.

This concludes Project Milk Carton’s five-part investigation into PBRF-LE fraud patterns across American child welfare systems. Read the full series at projectmilkcarton.org.

Project Milk Carton is a 501(c)(3) nonprofit investigating child welfare transparency and missing children cases. Support this work at projectmilkcarton.org/donate.